World Markets Advance on Rate Cut Hopes

123jump.com Staff
29 Oct, 2007
New York City

U.S. stocks edged higher in anticipation of a rate cut this week. Markets in Europe gained as well. Asian markets surged on a rate cut expectations in Japan, Australia, and India. Central banks in Australia, India, Japan, and the U.S. are likely to lower rates or leave them unchaged. Last week Mexico increased the rate by 0.25%. Gold and oil reached new highs as dollar fell to a record low against euro.

[R]4:30PM New York, 10:30PM Frankfurt, 5:30AM Sydney[/R]

U.S. stocks gained on earnings, higher oil price, and expectations of rate cut this week. Tech stocks led the gainers for the second day in a row. In European trading resource stocks led the mild rally.

Office Depot plunged after delaying earnings report, Kellogg fell after lowering the annual earnings guidance on higher commodities prices, and Verizon edged higher after reporting progress in selling TV services through Internet connection. Schnitzer Steel fell 15% after missing the earnings guidance.

Xstrata offered $2.75 billion to purchase Australia based nickel mining company Jubilee. Resolution board looked to negotiate with Pearl Assurance with a bid higher than that offered by Standard Life. UBS said that third quarter loss will not exceed the earlier guidance but warned that more losses are likely in the subprime bond mortgage portfolio if the U.S. mortgage securities fall further on a weakness in housing market.

In Asian markets, indexes closed higher led by a rally in banking and shipping stocks in Japan and Hong Kong. Strong earnings propelled Sensex index in India to a record high. Resource stocks lifted Australia ahead of rate decision in Australia this week.

[R]Global Markets Indexes[/R]

Dow Jones Industrial Average closed up 67.63 or 0.49% to a close of 13,806.70, S&P 500 edged lower 0.36% or 5.64 to 1,540.95, and Nasdaq Composite Index traded up 13.25 or 0.36% to a close of 2,817.44. In Toronto TSX Composite rose 119.42 or 0.84% to close at 14,415.85.

Of the 30 stocks in Dow Jones Industrial Average, 25 closed higher, 5 closed lower, and none were unchanged.

Microsoft led the decliners in the index with a loss of 1.6% followed by losses in JP Morgan of 1.4%, Caterpillar of 1.32%, and Hewlett Packard of 1.2%. Alcoa led the gainers with a rise of 2.82% followed by increases in Exxon Mobil of 2.2%, AIG of 2%, and McDonalds of 1.7%.

Of the stocks in S&P 500, 305 closed higher, 185 fell, and 10 were unchanged.

Twelve stocks fell more than 3% and twenty five stocks rose more than 3%.

Weyerhaeuser jumped 7.8% to lead the index followed by rise in Dillards of 6.4%, Juniper Networks of 5.6%, and RadioShack of 5%. Goldman Sachs, Deer & Company, and MEMC Electric Material jumped more than $5. Office Depot led the decliners with a plunge of 16% followed by losses in Yahoo of 7%, MBIA of 5.3%, and AMBAC of 5.2%. Tesoro, Unisys, Fannie Mae, and Teradata fell more than 4%.

In London FTSE 100 Index closed up 44.70 or 0.67% to 6,706.00, in Paris CAC 40 index rose 41.32 or 0.71% to close at 5,836.19, and in Frankfurt DAX index increased 60.50 or 0.76% to close at 8,009.67. In Zurich trading SMI gained 44.45 or 0.49% to close at 9,007.27.

In Tokyo Nikkei 225 index surged 192.45 or 1.17% to close at 16,698.08, in Hong Kong Hang Seng index closed up 1,181.68 or 3.89% to 31,586.90, in Australia ASX 200 closed up 91.50 or 1.37% to close 6,792.10.

Sensex in India edged higher 734.50 3.82% to 19,977.67. In South Korea Kospi Index increased 34.86 or 1.7% to close at 2,062.92 and Indonesia closed up 43.10 or 1.64% to 2,667.53. Philippines, on Friday, added 17.10 or 0.45% to 3,784.88, Singapore gained 48.23 or 1.24% to 3,819.78, and Malaysia increased 13.27 or 0.95% to 1,411.62. Thailand surged 20.46 to 915.03 to 2.3%.

In Latin Markets Venezuela led the gainers with a rise of 1.62% followed by increases in Brazil of 1.47%, in Colombia of 1.1%, in Peru 1.02%, in Argentina of 0.54%, and in Mexico of 0.4%. Chile lost 0.3%.

Bond Yields edged lower on 10-year U.S. bonds to 4.38% and 30-year bonds fell to close at 4.66%.

[R]Commodities, Metals, and Currencies[/R]

Crude oil jumped $1.67 to close at $93.53 per barrel for a front month contract, up 47.3% for the year, natural gas increased 5 cents to $7.27 per mBtu, and gasoline futures increased 5.34 cents to close at 232.70 cents per gallon.

Gold edged higher $5.10 in New York trading to close at $792.60 per ounce, silver closed up 15 cents to $14.43 per ounce, and copper for front month delivery lost 1.67 cents to $352.10 per pound.

Dollar edged record low against euro to $1.4424 from $1.4394 and higher to 114.65 yen from 114.18 yen.


[R]2:30PM New York – Verizon, Kellogg, and Office Depot report earnings.[/R]

Office Depot dropped more than 16% to $17.03 after it delayed its earnings release scheduled for tomorrow. The company cited a pending review by audit committee related to the timing of the recognition of “certain vendor program funds.”

The office supply store chain owns and operates 1,186 stores in North America and has 369 locations in the international markets or managed by franchisees.

In the last 52 weeks Office Depot stock has fallen from $42.61 on the decline in same store sales, lackluster operating margins, and a slow-down in general retail environment.

Verizon, ((VZ)) reported third quarter revenue increase of 5.8% to $23.8 billion and operating income increase of 19% to $4.2 billion, and net income per share of 44 cents compared to 53 cents a year ago.

Verizon wireless added 1.8 million retail customers and churn rate in the quarter was 1.21% with the average month revenue was up 1.9% to $52.17 and monthly data revenue was $10.59, up 43% from a year ago.

Verizon added 285,000 new broadband connections, 21% increase compared to a year ago to 8 million customers. Verizon added a net of 202,000 new fiber optic TV customers totaling at the end of the quarter to 717,000. The broadband internet and TV fiber network now reaches 8.5 million homes. Penetration for the service averaged 15.2% across all markets and was 20% for the Internet service based on Fiber optic line based Internet.

Kellogg Company ((K)) reported third quarter total revenue increased 6% from a year ago to $3.0 billion. Revenue in North America increased 4% and international sales increased 12%. Net earnings for the quarter were $305 million, 9% increase from a year ago and earnings per share increased 9% to 76 cents from 70 cents a year ago.

The company guided fiscal 2008 earnings between $2.92 and $2.97 per share. Kellogg stock fell 4% or $1.93 to $52.51 in the afternoon trading.



[R]1:00PM New York, 10:30PM Mumbai – Sensex in India added 3.8% and soared 42% in five weeks.[/R]

Sensex in Mumbai soared 3.82% or 734.50 to close at 19,977.67 after reaching an intra-day record high of 20,024.87. In the last five weeks the index has jumped 42% on strong fund flows from international investors. CNX Nifty index jumped 3.57% or 203.56 to close at 5,905.90.

Annualized wholesale price index for the week ended October 13th was unchanged at 3.07% from a year ago.

Daily trading on the Bombay Stocks Exchange was recorded at 8,884 crore rupees and on the National Stock Exchange was recorded at 21,809 crore rupees. Infrastructure, banks, and auto sector stocks rose sharply in the trading session.

Of the stocks traded on the BSE, 1,540 closed higher, 1,201 traded lower, and 320 were unchanged.

Oil in Asian trading closed above $93 per barrel lifting ONGC and Reliance Industries to record highs. ONGC surged 7.2% to 1,238 rupees and Reliance jumped 5% to close at 2,827.65.

HDFC, housing lender, soared 9.6% to close at 2,813 rupees.

Maruti Suzuki India reported second quarter fiscal 2008 profit increase of 27% to 466.50 crore rupees on revenue increase of 33% to 4,735.83 crore rupees. Maruti added 0.6% to close at 1,188 rupees.

Mahindra & Mahindra reported second quarter net revenue increased 12% to 2,871 crore rupees but net earnings fell 26% to 285 crore rupees. Mahindra stock dropped 0.7% to 796 rupees.

Infrastructure and power companies traded higher ahead of earnings from Bhel. Larsen & Toubro surged 11% to 4,277.45 rupees, Bhel increased 7.4% to 2,612 rupees, and NTPC closed record high of 233.25 rupees on 2% rise.

NTPC reported second quarter revenue rise of 17% to 8,016 crore rupees and net income increase of 31% to 1,925 crore rupees.

State Bank of India reported second quarter net revenue increase of 33% to 13,658.22 crore rupees and earnings increase of 36% to 1,611 crore rupees. State Bank of India stock added 1.6% to 2,118 rupees.

Grasim Industries reported second quarter net revenue increased of 25.30% to 2,519 crore rupees and net earnings increased 48% to 499.80 crore rupees. Grasim stock added 1.5% to 3,830 rupees.



[R]10:00 AM New York – U.S. Market averages open higher. Oil crossed above $93 per barrel and dollar at record low against euro.[/R]

U.S. averages opened higher as oil rose above $93 per barrel and dollar fell to a record low against euro. Nasdaq traded up 14.86 to 2,817.79 after 10 minutes of trading and S&P 500 added 4.83 to 1,540.29.

Merrill Lynch stock was trading 44 cents down to $65.65 after the news report in the Wall Street Journal suggested that Chairman and Chief Executive Stanley O’Neal may be forced out as early as today. Merrill last week reported a quarterly loss of $3.5 on $8.4 billion loss in subprime securities.

CH Energy ((CHG)) reported earnings per share of 27 cents compared to profit of 70 cents per share a year ago. The Central Hudson Gas & Electric Company reaffirmed its annual earnings guidance between $2.55 and $2.80.

Gehl Company ((GEHL)) reported third quarter earnings from continuing operations of 40 cents per share compared to 57 cents in the previous year on a decline of 17% in net sales. The company lowered its annual sales outlook between $445 million and $460 million earnings per share from continuing operations between $1.90 and $2.00. Gehl stock fell 12% at the opening.

Hertz ((HTZ)) reported third quarter sales increase to $2.45 billion, 9.3% increase compared to a year ago. Pre-tax earnings in the quarter fell to $162.7 million from $163.9 million. Earnings per share in the third quarter 2007 were 50 cents on 327.7 million shares compared to 46 cents per share on 231.9 million shares outstanding in the third quarter of 2006.

Oil futures are trading higher than $93 after two oil production platforms were forced to shut down, rising tensions in the Middle East and saber rattling between the U.S. and Iran, expectations of higher oil demand in the upcoming winter season, and record weakness in dollar.

European markets at mid-day are trading higher ahead of the market opening in New York. Norway is leading the region with a rise of 1.2% on higher oil prices followed by 0.7% rise in Spain, France, Germany, and UK. Switzerland and Italy added 0.4%.

In trading in the rest of Asian markets Hong Kong and India led the region with a sharp rise of 3.9% and 3.8% respectively followed by increases of 2.3% in Thailand, 1.9% in Taiwan, 1.7% in Indonesia and Korea, and 1.3% in Singapore and Australia.


[R]6:00AM New York, 7:00PM Tokyo – Tokyo stock market rose on financial and auto stocks. Asian markets surged led by banks. September retail sales increased 0.5% in Japan.[/R]

In Tokyo trading Nikkei 225 rose 1.17% or 192.45 to 16,698.08.

Of the Nikkei 225 stocks, 178 rose, 38 declined, and 9 were unchanged. Nissan Motor Corp led the advancers, spiking 14.15% the most since September 2000 on better-than-expected results.

In the first section of the Tokyo Stock Exchange 79 billion shares worth 1.1 trillion yen changed hands and in the second section 143 million shares valued at 4.3 billion yen were traded.

Oil prices climbed to a record $93 per barrel after Petroleos Mexicanos shut down a fifth of its production and the dollar slumped to a record 1.4426 against the euro. Mitsubishi Corp edged up 3.02%.

The yen firmed to 114.19 from 114.21 against the dollar and gained 164.72 from 164.75 against euro.

Of the index shares, Nissan Motor Corporation led advancers with a rise of 14.15%, followed by gains in Resona Holdings of 10.34%, in Sumitomo Mitsui Financial Group of 9.54%, in Nippon Yusen of 8.41% and in Sumco Corporation of 7.12%.

Financial stocks also gained after U.S. mortgage lender Countrywide Financial Corporation announced it would recover from the credit market turmoil and forecasted return on equity of between 10% and 15% in 2008. Resona Holdings climbed 10.34%, Sumitomo Mitsui Financial Group rose 9.54% and Mitsubishi UFJ Financial Group soared 4.70%

The Ministry of Economy, Trade and Industry revealed today in its preliminary report on the current survey of September commerce retail sales increased 0.5% to 10.7 trillion yen. Commercial sales also rose 1.3% to 51.9 trillion, while wholesale sales edged up 1.5% to 41.2 trillion yen. However, large-scale retail sales slipped 0.3% to 1.5 trillion yen.

According to the report, third quarter commercial sales firmed 2.7% to 151 trillion yen. Wholesale firmed 3.7% to 118 trillion yen and retail sales slumped 0.5% to 32.9 trillion yen.

Nissan Motor Corp and Indian truck manufacturer Ashok Leyland jointly announced today the companies had signed three joint venture companies agreement to manufacture light commercial vehicles.

The Vehicle Manufacturing Company will be located in India and be 51% owned by Ashok Leyland and production volume is expected to be 100,000 units starting 2010. Power Manufacturing Company, owned 51% by Nisaan, will be responsible for assembly and export of engines and other drive-train components for trucks. Technology Development Company would be responsible for the development of LCV products and related power-trains.

Separately Nissan surged 12% after reporting better than expected earnings on Friday. Sales in emerging markets, China and Russia helped the performance. The company reported 13% increase in operating profit and 12% in sales in the second quarter of the fiscal 2008. The company also announced stock buyback of 27 billion before the calendar year end 2008.

Softbank announced yesterday that it would spend 40 billion yen on a data centre in Southwestern Japan in Kitakyushi, Fukuoka Prefecture in October 2008. Two additional facilities, each with a floor space of 3,300 square metres will also be built by 2009.The data centre will house more than 100,000 computer servers and have an area of 140,220 square meters.

Financial stocks also gained on improved investor sentiment after U.S. brokerage Countrywide Financial Corp announced that it would recover from the credit market turmoil and expectations that the U.S. Federal Reserve might cut its key interest rate this week Mitsubishi UFJ Corp rose 4.70% and Mizuho Financial Group jumped 5.62%.

Nippon Yusen soared 8.4% to 1,251 yen after announcing today it expects net income for the full year ending March 31 to be 111 billion yen compared to 100 billion yen forecasted earlier, on rising demand of ore and bulk commodities transportation, especially to China. Operating profits in the second quarter rose 54% to 26.3 billion from 17.1 billion yen. Sales in the quarter also soared to 655.3 billion from 528.8 billion a year earlier.

Other shipbuilders gained as well. Kawasaki Heavy Industries and Mitsui Engineering & Shipbuilding firmed 1.95% and 3.95 correspondingly.

Advantest Corp led decliners in the Nikkei 225 index with a plunge of 6.65%, followed by losses of 4.17% in Matsushita Electric Work, 3.32% in Clarion Company Limited, 3.29% in Fast Retailing, and 2.39% in Trend Micro Inc.

Advantest Corp slipped after reporting first half net income fell 16.9 billion yen compared to 22.2 billion yen a year earlier. Sales were at 114.9 billion yen from 120 billion yen in 2006. Fiscal year net income was revised downwards from 35.6 billion yen to 33 billion yen and sales projections were cut from 235 billion yen to 230 billion yen.

Toshiba Corporation announced today first half operating income rose 17.3 billion yen from a year ago to 82.5 billion yen, while sales stood at 3.6 trillion yen First half net income rose 6.9 billion from a year earlier to 45.7 billion yen. However, the company projected annual profit will climb by 50% on increased demand for semiconductors in music players and digital cameras. Net income is forecasted to rise 31% to 180 billion yen, while annual sales might firm 9.6% to 7.8 million yen. Operating profit for the year will probably rise to 290 billion yen.

Toshiba added that full year profit at the chip business may rise to 150 billion, notwithstanding the anticipated 20% decline in NAND flash chip prices in the second half due to increased production and cost cutting measures being implemented.